Multiple Choice
Which of the following best helps entrepreneurs assess the viability of a company for generating profits before making an investment?
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7. Receivables and Investments
Introduction to Investments in Securities
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Which of the following is an example of marketable securities?
A
Inventory
B
Prepaid insurance
C
Treasury bills
D
Goodwill
Verified step by step guidance1
Understand the concept of marketable securities: Marketable securities are liquid financial instruments that can be quickly converted into cash at a reasonable price. Examples include Treasury bills, government bonds, and corporate stocks.
Analyze the options provided: Inventory, prepaid insurance, and goodwill are not considered marketable securities because they are not liquid financial instruments and cannot be easily converted into cash.
Focus on Treasury bills: Treasury bills are short-term debt instruments issued by the government, making them highly liquid and a prime example of marketable securities.
Compare Treasury bills to the other options: Inventory is a physical asset, prepaid insurance is an expense paid in advance, and goodwill is an intangible asset. None of these meet the criteria for marketable securities.
Conclude that Treasury bills are the correct answer because they are liquid, short-term financial instruments that can be easily traded in the market.
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